RBIs Deputy Governor Urjit Patel was today appointed as the next Governor of the central bank after Raghuram Rajan demits office on September 4.
Advertisement
“Patel is more of an inflation-focused guy and effectively with the inflation rate going up, expectations of a deep rate easing have diminished”, said Dhananjay Sinha, head of research at Emkay Global Financial Services.
During his time as deputy governor, Mr Patel had headed a panel that recommended landmark changes to monetary policy in India, including a switch to inflation-targeting and the creation of a committee to set interest rates.
As per ET, the shortlist of names considered by the committee included the department of economic affairs secretary Shaktikanta Das, chief economic advisor Arvind Subramanian, former deputy governor Subir Gokarn, former World Bank chief economist Kaushik Basu and Dr Patel. One of the RBI’s four deputy governors, Patel, 52, was reappointed in January for another three years. He will start his three-year term on September 4. “Institutional investors, both domestic and foreign, would welcome the appointment of Patel as successor to Rajan, ” said Ajay Bodke, CEO & Chief Portfolio Manager – PMS, Prabhudas Lilladher. He is one of the key architects of current policies at the RBI.
Sources said that Patel will continue the RBI’s fight against inflation and keeping interest rates high, which, in the past, has not gone down well with certain sections of the industry and polity.
Patel, whose remit at the RBI included managing money markets, has faced criticism from market participants, however, with some traders and bankers complaining that he kept liquidity tight at a time when the RBI was lowering rates, starving banks of cash.
Besides controlling inflation, which has breached 6 per cent target, Patel will face another important task of carrying forward the clean-up exercise at banks, particularly those in the public sector. Besides the recent change at RBI, fluctuating global crude oil prices, caution over the increased chances of a USA rate hike, derivatives expiry as also the pace of foreign funds inflow, could also determine the course of key indices, as per industry experts.
Rajan tightened provisioning rules for bad loans and hoped to clean up the banks’ books by March next year – a job that Patel will now have to accomplish. He also worked briefly at the International Monetary Fund.
Advertisement
The new governor is sure to reiterate the virtues of macro-prudential economic policies, whether monetary or fiscal. He is known as an expert on inflation and has also been with the International Monetary Fund and the Boston Consulting Group.
